Unfortunately, I have confirmed by testing that the Peacewalker 2nd battle is unbeatable in JPCSP. I have tried it with a myriad of settings offering maximum compatibility, to no avail.
And I worked hard to make sure. Since I couldn't transfer my jpcsp savegames to my PSP, I had to completely start over on my PSP to get to the peacewalker 2nd battle. I beat the bugger with just rank 2 launchers. Something I couldn't do in jpcsp with rank 4 launchers.
Devs, PLEASE! Make it work. :'(
QEDIT:
Extremely good news. If you have Magicsave in your PSP, you can work around this bug by loading your jpcsp save to your actual PSP. get through the peacewalker 2 battle on your psp then transfer back to jpcsp for mondo graphics again.
On how to actually have the psp read jpcsp saves, refer to
http://wololo.net/talk/viewtopic.php?f=28&t=7947
Use SFO type 2 and don't forget to have magicsave "read invalid data".